Dissecting anomalies in Islamic stocks: Integrated or segmented pricing?

Zaremba, Adam; Karathanasopoulos, Andreas; Maydybura, Alina; Czapkiewicz, Anna; Bagheri, Noushin

doi:10.1016/j.pacfin.2018.05.006

Cited by 12 publications

(8 citation statements)

References 50 publications

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“…This could be an evidence that the size effect can be universally found in every stock market. Meanwhile, the value effect is more universal, which is consistent with Fama and French [1] and Nartea et al [19] whose studies focus on conventional stock and also consistent with Zaremba et al who found return premium based on book-to-market equity to be consistent in Islamic stock in Middle Eastern countriesv [22].…”

Section: Discussionsupporting

confidence: 78%

“…More than that, the full period results in this study contrast with Guidi and Gupta (2013) who found that the conventional stock market in Singapore and Thailand is more efficient compared to Malaysia and Indonesia. This may happen as the risk profile of Islamic stock is different from its conventional counterparts and also impacts its return [11], [22]. In the Malaysia Islamic stock market, Arshad [14] found that Malaysia was at its highest efficiency during 2005 and after 2011 which is confirmed in this paper since we found no evidence of mispricing neither during the pre-crisis period nor the post-crisis period.…”

Section: Discussionsupporting

confidence: 77%

“…Based on Zaremba, Karathanasopoulos, Maydybura, Czapkiewicz, dan Bagheri, the unique characteristics of Islamic stock will give some impact to price formation of Islamic stock in many ways [22]. First, Islamic stock gets extra attention from two groups of investors that usually do not invest in a conventional stock, which are religious and/or ethical investors and also Islamic funds, which will create extra supply and demand that may result on mispricing.…”

Section: B Impact Of Sharia Screening On Islamic Stock Pricingmentioning

confidence: 99%

“…The Fama-French Five Factor Asset Pricing model is not ideal to be used as this model required a huge number of stocks to make the component of each portfolio sufficient [26]. We also use this FF3F model, which was developed by using conventional stock data, because the use of this model to study Islamic Stock is more prevalent [17], [22], [27]. (1) with R it represents the return of portfolio i on t period while RF t represents the return of risk-free asset at period t as a dependent variable.…”

Section: B Research Modelmentioning

confidence: 99%

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Mispricing on Islamic Stock Markets in ASEAN Countries

Prilitaningtyas¹,

Prasetyo²

2019

Proceedings of the 12th International Conference on Business and Management Research (ICBMR 2018)

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The purpose of this study is to detect any mispricing on Islamic stock in four countries which are the founding fathers of ASEAN (Indonesia, Malaysia, Singapore, and Thailand). Three-factor Asset Pricing Model [1] is employed in this study with daily individual stock price from June 2005 until December 2017, and later categorized into 25 portfolios based on their size and book-to-market equity. This study found no evidence of mispricing in Indonesia and Malaysia so that these Islamic stock markets are efficient. Different evidence was found in Singapore and Thailand as in those Islamic stock markets significant mispricing can be found in Thailand Islamic Stock Market and marginally significant mispricing in Singapore Islamic Stock Market, which indicates those markets are not efficient. Moreover, this study also found that Financial Crisis 2008 only has a significant effect in Indonesia and Thailand Islamic Stock Market. This paper gives new insight of Islamic Stock Market Efficiencies by focusing on Islamic stock in ASEAN which is a region dominated by emerging markets and this study also used the daily stock price of an individual stock and not index level data.

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Section: Discussionsupporting

confidence: 78%

Section: Discussionsupporting

confidence: 77%

Section: B Impact Of Sharia Screening On Islamic Stock Pricingmentioning

confidence: 99%

Section: B Research Modelmentioning

confidence: 99%

See 2 more Smart Citations

Mispricing on Islamic Stock Markets in ASEAN Countries

Prilitaningtyas¹,

Prasetyo²

2019

Proceedings of the 12th International Conference on Business and Management Research (ICBMR 2018)

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“…In addition, as part of ethical finance, the price of Islamic funds tend to be stable, since being part of ethical-based investment, they receive more coverage from analysts than their non-Islamic counterparts (Hong & Kacperczyk, 2009). Finally, limits on the ratio of interest-based debt and income lower credit risk and thus reduce price volatility (Zaremba et al, 2018).…”

Section: Financial Screeningmentioning

confidence: 99%

Are Islamic Stocks Less Exposed to Sentiment-Based Mispricing Than Non-Islamic Ones? Evidence From the Indonesian Stock Exchange

Hashfi

Naufa

Munawaroh

2021

JIMF

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The aim of this research is to verify the role of Islamic value in stock mispricing in the Indonesian capital market. Empirically, high investor sentiment can lead to mispricing on equity appraisal. When investors feel excessively optimistic about their valuation, equity will be overpriced, or vice versa. The presence of Islamic values, such as the prohibition of interest, speculative and uncertain transactions, and excessive leverage, arguably reduce sentiment-based mispricing. Daily and cross-sectional market data were employed. In addition, principal component analysis was conducted to construct a firm-specific investor sentiment variable. With regard to the method, the Hausman-Taylor (H-T) approach was used to deal with heterogeneity, endogeneity, and the time-invariant variable in Fama-MacBeth regression. The results show that our baseline analysis confirms the mispricing of overall stocks. However, Islamic stocks are less exposed to sentiment-based mispricing than their non-Islamic counterparts. The results are consistent with our robustness test, in which we estimate the equation model across industry and portfolio. Finally, our findings imply various insights for both investors and policymakers.

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Why do sukuks (Islamic bonds) need a different pricing model?

et al. 2020

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The global interest in sukuk, an Islamic alternative to bond financing, has grown rapidly, particularly after the 2008 global financial crisis, due to its distinctive features and investment quality. Sukuk were first launched in Malaysia and are presently available in 29 countries, including the United Kingdom, United States, Singapore, Hong Kong, and Luxembourg. Despite the global market prevalence of sukuk, asset pricing literature has not yet addressed the pricing mechanism of sukuk, which is inherently different from bonds and equity due to the contractual differences. However, analysts use LIBOR, or the Islamic interbank benchmark rate, as the ad-hoc benchmark to evaluate sukuk performance. In this study, we develop a basic pricing model that captures the common risks in sukuk returns. We identify two risk factors for sukuk that require risk premiums: (a) sukuk market risk and (b) information asymmetry risk. Using these two common sukuk risks factors, investment analysts can estimate the fair value of sukuk more precisely than other ad hoc measures available.

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Dissecting anomalies in Islamic stocks: Integrated or segmented pricing?

Cited by 12 publications

References 50 publications

Mispricing on Islamic Stock Markets in ASEAN Countries

Mispricing on Islamic Stock Markets in ASEAN Countries

Are Islamic Stocks Less Exposed to Sentiment-Based Mispricing Than Non-Islamic Ones? Evidence From the Indonesian Stock Exchange

Why do sukuks (Islamic bonds) need a different pricing model?

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